Should You Play Ali Baba?

I am really not updating this blog too much, but since most of the last few posts have been about IPO’s I thought I should say something about the upcoming Ali Baba IPO.

First, the same rules apply. Much like the $FB IPO, what you should do will depend on the first day:

1) If the price “pops” stay with it as long as it keeps above the opening price the first day. If it wilts, get out and wait for a return to that price.

2) If it does not pop, don’t even try it. Wait for it to recover.

What do I think will happen?

I think it will “pop”. There is hype. It is not too expensive. It has real earnings. It has a big “moat” around China. ($FB was not as clear the first day, although it has executed flawlessly)

The problem is, it could pop too much and come back down.

In the long run, $BABA is formidable, it has little competition in China and it will expand all over the world now. Fund managers that like $AMZN; should prefer $BABA with a forward P/E around 30-40, compared to $AMZN’s 200-220. Think about it, $BABA is $AMZN, $EBAY and Paypal combined into one for all of China with over one billion people.

The IPO will start trading on Friday. I expect $90 per share or north of that after being priced around $70-$75.

After that, the market rules and I will update if necessary.

P.S. I should have mentioned that the way to play the $BABA IPO has been thru the $YHOO shares since this company owns 23.5% of $BABA. However, $YHOO is selling part of its stake, so that the pop would have to be large in order for you to benefit if you buy $YHOO shares today

 

 

What’s Up With $TWTR’s shares?

TWTR$TWTR shares have been soaring the last few days. The valuation is simply absurd, but as you can see from the graph, the stock keeps going up day after day. In four days, it has gone up from about $60 to a close of $73.31 today.

The valuation is absurd, but the graph above is the typical IPO graph, in which the stock opens up the first day, goes down, but it is only until it reaches the high of the first and second day that it soars.

And indeed, the day $TWTR went past the $50 of the first day, it just kept going and I suspect it will continue doing so.

Why?

Simple, $TWTR’s float is tiny. Today, 82 million shares of $TWTR traded, but there are only 70 million shares available for trading. So, if 50,000 people and 20,000 institutions decide they want to own 1000 $TWTR shares (and I have had at least four acquaintances ask if it was a good investment), then there will be few shares available for trading and the stock will go up. Like it is doing right now…

Think about it, more and more people want to own 100,200 or whatever shares, they hear it is going up and even more want it. Even if it is absurdly expensive. It may be the beginning of a cult stock and there are few shares to have around.

So, $TWTR goes up, not because of short covering, or because people are speculating, it goes up because its shares are scarce, very scarce.

In fact, the $TWTR IPO has been similar to the $FB IPO; the difference being that $FB did the IPO technical ride up it in slow motion.

A very similar graph occurred with $FB except there were of shares to trade, lots of them, there is almost two billions of shares available for trading. In this case very few shares are available but a sort of cult $TWTR shares is forming.. For those that do not seem the similarity, the FB graph is the same but took a year and a half to do its thing. Sort of like $CUDA, which is doing the same, but very fast.

Here is $FB

FB

So, I think $TWTR will keep going up, and one day it will fizzle, but it seems that that day is not close.

What to do with the Twitter IPO

Everyone wants to know whether the Twitter IPO will be fumbled like Facebook’s. So, I will give you my take:

Read the post on Facebook

and then read this post after Facebook went public, if Twitter goes down on the first day.

The same rules apply: It is expensive, there is hype and you will likely not get any shares before IPO day. So, if it shoots up on day one, you can ride it until it stops. If it goes down, don’t touch it until it comes back up to IPO day trading price.

About the only significant difference between the two is that Twitter will sell fewer shares.

The main difference between the two, is that Facebook was further along the line of generating revenue when it went public and had ore users.

People say the hype is less, but I hear a lot of hype. I hear a lot of “experts” saying that it is cheap, they are excited, etc.

At $17 dollars, Twitter is at what is likely a reasonable price, but I would bet it opens way above that, where it may expensive.

Trade it, don’t buy it…

yet. Like Facebook, there will be a time for that later on.

The Case For the QQQ’s

I don’t like to post a lot. It takes time. It takes research and you need something important to say. Thus, I only post when something unusual catches my attention. And something did today:

The $QQQ

For those that don’t know, the $QQQ is the PowerShares QQQ Trust, a “stock” that trades like a regular share, but “imitates” what the NASDAQ- 100 Index is doing. The idea is that the $QQQ will do exactly what that index does. Index up 10%, the $QQQ is supposed to mimic it and usually does very closely.

Well, let’s look at the daily $QQQ today:

QQQD

As you can see, the $QQQ in the daily chart has all of the important features of a stock that is breaking: Trix daily is on the way up, it is pushing the Bollinger Band and it is breaking resistance.

What is neat, is that the weekly chart is as good or as powerful as the daily chart:

QQQW

Again, the $QQQ in the weekly chart is showing a Trix that is turning towards up (not turning yet, but the daily leads it and it is flat), a stock that is breaking and likely the weekly chart also pushing the Bollinger Band in the next few days, or producing a “squeeze” in Bollinger band terms

What is most interesting about this, is that the $QQQ is not a stock, it is an index composed of 100 stocks. And when you think about it, 100 technological stocks and technology stocks have been in the doghouse for a long time.

So, this looks significant, I think.

It does not mean that you have to invest in the $QQQ, you can look at the components and pick your favorite stocks to follow or trade. If I look at the list, $AAPL, $CELG, $AMZN, $NFLX, $ALXN,$BIDU, $YHOO and many others are doing really well. Or you could go nuts and buy one of those nutty indexes like the $TQQQ, triple what the $QQQ does or the $QLD, double what the $QQQ does. Those are too risky, but the sky is the limit if you are aggressive.

The point is that I think the charts are saying that the $QQQ is turning up, looking good and if you had an investment idea in the technology world, it looks like it is time to go for it, the charts suggest so. If you find a component that looks better than this. Please! Let me know! You can make more money with individual stocks.
Good luck and be careful, this is not investment advice, just letting you know something significant is going on!

Trix and $AAPL: My Favorite Technical Indicator and My Favorite Stock

Once in a while I see something that I can’t resist writing about because it is something that historically has worked so well in the past. A couple of weeks ago, I told you about $FB and clearing out those that bought the first day, it has yet to happen, but it will, the market has not helped.

As I have told you here, my favorite technical indicator is the Trix, a slow moving average, which avoids quick moves by smoothing out price movements. You can use the Trix on a daily and weekly basis and sometimes, not too often I look at the monthly Trix. But in general, I love the weekly Trix. If a stock is not in a strong up move of the Trix, I don’t trust what the daily Trix is telling me.

Right now, if you look at $AAPL, my favorite stock, the daily Trix is looking very nice, still on an uptrend, as you can see below in the graph, the Trix being the red line. I have placed arrows whenever the Trix has made a low and turned around, just to show how good it has been in the recent past.

daily

As you can see the Trix gave a good signal in late April, $AAPL moved about sixty dollars before it went down. Then again in late June, the Trix said buy and $AAPL is still moving. But to see if you can stay or you should sell in the dips in the daily Trix, I look at the weekly Trix for conformation. And here it is, the weekly Trix:

weekly

Asa you can see, the weekly Trix is still in an uptrend, which tells you that you can ignore the daily movements and stick with it for the time being. Note that there are six buy signals, as indicated by the arrows since 2010, all of which would have helped you make good money, as all worked quite well. In fact, the only fuzzy one was the last one.

But what I found intriguing is what happens when you look at the monthly Trix. This is shown below:

monthly

As you can see, since 2000, there have been only THREE monthly buy signals: One in 2000, when the stock went from about $7 to $13, another in 2008 when the stock went from about $89 to $190 and the current one that who knows how high it will take it.

But what is important is that this is a significant buy signal that appears to say that $AAPL has ways to run. Unless something happens in the world, it is unlikely that there will be a reversal and $AAPL should continue to run.

I promise to update when this signal reverses.

Seeking Closure On The Facebook IPO

Last year, I suggested not buying Facebook on the IPO, because it seemed expensive, but with some suggestions as to how to trade it on the first day depending on what it did. My suggestion was valid, the stock went down and after the first day of trading, I suggested FB was likely dead money until it managed to go again above the IPO price of US$ 38 and I presented this suggestion of possible paths:

FB1Well, we clearly took path 2, Facebook went down to less than $20, found some support and then began rising.

Then last November, I suggested you may start trading it, as the base had been formed and it was likely to give opportunities for making money without the price collapsing again. If you were dying to own shares, November was the time to get in.

Then last week, Facebook reported that 41% of its revenues came from ads on smartphones, surprising lots of people as the stock was languishing around $26. The stock soared and in the last four days it has inched up closer to the magic $38 price of the IPO:

fb

Magic, because a lot of people bought stock that first day at $38 and ever since May 2012, 16 months ago, they have been sitting on a loss hoping the shares will pop back so they can sell. Tomorrow they may get their wish.

Indeed, as you can see, volume today in $FB was even higher than yesterday, with the stock attempting to break through the $38 barrier a couple of times, without success. The grapg reflects the fact that institutions were under invested in $FB.

This is a texbook case of resistance. in stock technical analysis. From $38 to around $41.7 there are a lot of people still holding a losing position in $FB shares ,in what they thought was the best investment in their lives. Fourteen months later they are still losing money and they have been thinking that if it gets to their price, they will sell and move on.

They should be doing precisely the opposite. Because once the buying power that is present in the market buying $FB shares sweeps them all up, it is no man lands above $41.7. The sky is the limit, no resistance above. And if this happens (A big if still, but given the volume today, I think it will happen) then $FB shares could soar in parabolic fashion and I don’t want to be left out of this move. It may take a few days, or even weeks, but if and when $FB closes above $41.7, it should become the darling of momentum traders and show quite a move up.

This is exactly what I suggested last May, I just did not think it would take that long for $FB shares to recover.

And I will like to show the same two examples I did then from two very famous IPO’s. First the Netscape IPO:

NSCP

On the first day of trading in 1995,  NSCP shares opened at $60 and rose as high as $80, only to lose most of the ground that same day. The IPO was at $28. The stock spent a couple of months consolidating, but as you can see, it was only once those that bought the first day between $60 and $80  were absorbed during a few weeks, that the stock went up and soared reaching a value of around $170 in a very short time, once it went past $80.

GOOG was a similar story:

GOOGIt came out near $100 with a lot of negative press about its valuation, rose to $118 in a few days only to fall back to $100. Then it began rising and once it cleared off all the buyers between $100 and $118 the first day, it proceeded to double in short order.

Well, I contend that $FB has done the same thing but in a much slower time frame and if the market manages to clear off all the buyers between $38 and $41.6, there is no resistance after that and we may see a parabolic move after that.

Here is the band between the two blue lines where the sellers have to be swept. Above that, there is NO resistance:

FB38

With that, we would have finally have found closure on the $FB IPO and we can finally move on.

Now May Be The Time For Facebook

In May I suggested you trade $FB the first day, but stay away from it a an investment. After six months, the lockups are over and the chart looks good, so, for those of you dying to but $FB shares this may be the time, you have the green light medium term (It has gone up quite a bit already, but this is not a trade, is an investment)